ICRA : Surge in commodity prices may delay India's hydrogen consumption goals

5 May 2022 , 02:10 PM

As part of ICRA’s climate series coverage, ICRA in its recent research update has analysed the economics and viability of plans for production of green hydrogen. The report mentions that 98% of the hydrogen is produced with use of fossil fuels currently (grey or blue hydrogen), however surge in fossil fuels prices has raised the levelized cost of hydrogen (LCOH) production by 3 - 4x, bringing it at par with that for green hydrogen (~US$5/kg). This, if sustains, may augur well towards a faster adoption of green hydrogen technology.

Commenting further, Mr. Rohit Ahuja, Head of Research and Outreach, ICRA says, “Electrolysis is the most preferred technology of producing Green Hydrogen, however cconsidering the recent surge in metal prices on geopolitical disruptions, the expected reduction in manufacturing costs for electrolysers may be back-ended to close to 2030, rather than in the immediate term. India’s drive to enhance green hydrogen production could entail overall investments of ~Rs 4 trillion (factoring RE capacity additions of 60 GW and investments in electrolyser manufacturing facilities).”

Green Hydrogen share in total hydrogen production in India is expected to increase to 30%/80% (from nil) by 2030/2050, along with 4-5x increase in overall consumption to ~30 mmt (from 6 mmt currently). A major shift in demand is expected towards transportation (hydrogen fuel cell vehicles) and power generation sectors and will consume around 30% of the hydrogen demand by year 2050

Hydrogen demand will see shift to transport and power going forward

Source: TERI, ICRA Research
 
Concludes Mr. Ahuja, “Incentives from the government are critical to spearhead investments for infrastructure development for storage, transport and distribution. Electrolyser being critical for production of Green Hydrogen, the Governments’ plans for PLI on its manufacturing would be critical to achieve cost reduction targets for production of green hydrogen, especially considering the surging input costs.”